Kansas Takes On Coal Industry Over Global Warming

By Ken Stier

Monday, 10 Mar 2008 | 2:59 PM ETCNBC.com

SHARES

Kansas has become an unlikely battleground over the future of coal-fired power plants in the age of global warming.

Most activism on global warming has sprung up in states on the liberal coasts but Kansas, in the country’s heartland, is the first state to block the construction of coal-fired power plants specifically because of their climate change impact.

The Kansas legislature recently passed legislation to undo that, thwarting Governor Kathleen Sebelius’ authority on the issue, but she is expected to veto the bill this week, setting the next phase of a closely watched test case.

On one level the battle in Kansas is about the legal authority of states to regulate greenhouse gases in the absence of much-needed federal regulations, but it is also a broader struggle over how coal will figure in the country’s future energy mix.

Coal, which currently supplies 50 percent of the nation’s electricity needs, accounts for about 40 percent of all carbon emissions.

“We are in the midst of perhaps the biggest assault on a single source of power generation in decades,” says Dan Reidinger, spokesman for Edison Electric Institute, which represents 70 percent of the U.S. electric power industry.

“Kansas is something that is on the minds of every utility CEO, but the issues represented in that debate have been in the forefront of our minds for a number of years now.”

The Kansas showdown was triggered by plans to build two new 700 MW conventional coal plants unveiled by Sunflower Electric Power, a cooperative utility that would share the power with 67 others in Kansas and neighboring states, including the fast-growing suburbs of Denver.

“We still firmly believe these coal plants are the right thing to do,” said Steve Miller, Sunflower spokesman. The plants would be operational for 50 years.

While there is still no current cost to carbon emissions, just about everyone agrees this is coming in the next few years. The main uncertainty is what that cost will be.

Miller said his new plants would be economic viable even if carbon emissions eventually cost $30 per ton. But at that price, residents of Kansas, which currently emit about 35 million tons a year, would have to pay an additional $1 billion a year, he added.

The regulatory uncertainty about the eventual cost of carbon – together with rising construction costs - is playing havoc with industry efforts to meet electricity demand which could grow 40 percent by 2030, unless the country makes significant efficiency and conservation gains.

That means some 350GW of new power generation – that’s 500 average-sized power plants -- will be needed, requiring - at roughly $1,500/kW – some $525 billion in capital, according to Morgan Stanley.

The nation is already struggling to bring new capacity on line.

More than 13,500 MW of capacity was canceled through the third quarter of last year – more than for the entire year of 2006. Eighty-two percent of that was coal.

The Kansas case has been the subject of intense lobbying by industry, including coal companies such as Peabody Energy , which could become a major fuel supplier, as well as environmental groups, such as the Sierra Club.

Nati Harnik

Coal Plant

Bruce Nilles, director of the group’s national coal campaign, says Kansas is very important to Peabody, which could supply 5-6 million tons of coal per year to the two new plants. But with with the growing number of canceled coal power projects around the country, “Peabody sees their markets evaporating…[and] they have drawn a line in the sand” with the Kansas projects.

Peabody officials did not immediately return calls.

“I believe it would be irresponsible to ignore emerging information about the contribution of carbon dioxide and other greenhouse gases to climate change and the potential harm to our environment and health if we do nothing,” Roderick Bremby, Kansas’ secretary of health and environment said in a statement when he denied Sunflower’s permit last October.

He cited the landmark Supreme Court decision reached in April 2007 (Massachusetts v the Environmental Protection Agency), determining that carbon dioxide is a pollutant the EPA regulates.

To date though, the Bush Administration has refused to adopt regulations on carbon emissions, leaving states to enact a patchwork of measures that currently bedevils national planning by industry.

The Kansas legislation passed March 5 would prevent the state from imposing restrictions more stringent than adopted by the EPA and strip Bremby’s “emergency authority” to deny the permits on the basis of the harm to environment and health.

“Due to the Legislature’s decision to keep that language in this bill, it’s really not a question of if she’ll veto, but when,” said Nicole Corcoran, a spokesperson for Governor Sebelius.

The Kansas case presents a new challenge for the coal industry, which is now suffering regular plant setbacks in other states, although they are not explicitly a result of global warming concerns.